Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. No. 03-cv-02113) District Judge: Honorable Mary A. McLaughlin.
The opinion of the court was delivered by: Roth, Circuit Judge
BEFORE: ROTH and CHERTOFF*fn1, Circuit Judges, and RESTANI*fn2, Chief Judge.
In this appeal, we are asked to determine whether the Bankruptcy Court's decision to deny enforcement of an otherwise applicable arbitration clause was proper.
Ethel M. Mintze and American General Consumer Discount Company entered into a loan agreement. Mintze subsequently filed a voluntary Chapter 13 bankruptcy petition. After American General filed a proof of claim, Mintze filed a complaint in the Bankruptcy Court seeking, inter alia, to enforce a pre-petition rescission of the loan agreement. American General Consumer Discount Company and its parent company, American General Financial Services, (collectively "AGF") then filed a Motion to Compel Arbitration, which the Bankruptcy Court denied. AGF claims that the Bankruptcy Court did not have the discretion to deny enforcement of the arbitration agreement.
Based on the provisions of the Federal Arbitration Act of 1947, 9 U.S.C. § 1-14, (FAA) and Mintze's failure to establish that Congress intended to preclude waiver of judicial remedies for her claims, we hold that the Bankruptcy Court lacked the authority and discretion to deny enforcement of the arbitration provision. We reverse the District Court Order affirming the Bankruptcy Court's decision, and we remand the case to the District Court to remand it to the Bankruptcy Court with instructions to order the parties to engage in arbitration in accordance with the terms of the arbitration provision.
Ethel M. Mintze is a retired and disabled homeowner. She lives with her children in a row house in Philadelphia. Late in the year 2000, she had to replace the heater in her home. The cost of a new heater was $3800. Unfortunately, Mintze could not afford it. A&M Heating, a heating contractor, referred Mintze to AGF. On October 20, 2000, Mintze and AGF entered a loan agreement, whereby AGF loaned Mintze the money to purchase a new heater in exchange for Mintze consolidating that loan and other debt, including her mortgage, into a home equity loan with AGF.
The principal balance of this agreement was $44,716.34, and consisted of her mortgage ($25,602.55); the balance of her credit card debt ($10,463.51); the cost of the new heater (about $3800); settlement charges ($2821); and premiums for two life insurance policies ($1629 in a credit life insurance policy,*fn3 and $400 in a term life insurance policy). The terms of the loan agreement were payments of $551.13 per month over fifteen years at an annual percentage rate of 13.44%. The loan agreement also contained a demand clause and an arbitration clause. The demand clause allowed AGF to accelerate the loan after five years. The arbitration clause stated that "all claims and disputes arising out of, in connection with, or relating to [the] loan" must "be resolved by binding arbitration."
Mintze began to fall behind in her payments to AGF, and on December 4, 2001, she voluntarily filed a Chapter 13 petition for bankruptcy. AGF filed a proof of claim against Mintze's estate. Mintze then filed a complaint against AGF in the Bankruptcy Court. In her complaint, Mintze alleged that AGF induced her to enter an illegal and abusive home equity loan that resulted in AGF holding a mortgage lien against her home; she sought to enforce a pre-petition rescission of the mortgage that she asserted under the Truth In Lending Act, 15 U.S.C. §§ 1601-1667f ("TILA"); and she asserted several other claims under federal and state consumer protection laws.*fn4
On May 20, 2002, AGF filed a Motion to Compel Arbitration. During the motion hearing, the Bankruptcy Judge sought to confirm two stipulations of the parties. First,
THE COURT: . . . [L]et me first confirm that the parties have agreed, at least for purposes of this argument, that the matter before me is a core proceeding. [AGF's Counsel]: Yes, ...